Why did Tata Group replace Cyrus Mistry as the chairman?

Tata Sons Board's decision to replace Cyrus Mistry with Ratan Tata as the Tata group chairman (interim) has taken the corporate world by a storm.

Tata Sons decided to remove Cyrus Mistry as the chairman in the “larger interest of the group”. (Reuters photo)

Tata Sons Board’s decision to replace Cyrus Mistry with Ratan Tata as the Tata group chairman (interim) has taken the corporate world by a storm. If CNBC-TV sources are to be believed, the decision to replace Cyrus Mistry was ‘performance-based’. The channel said that Tata Sons decided to remove Cyrus Mistry as the chairman in the “larger interest of the group”. There are also reports that over the past 6 months, serious differences had emerged between Ratan Tata and Cyrus Mistry. According to the report, Ratan Tata, will meet all Tata Group CEOs this week. A Town Hall is likely in the coming weeks to address the group. The Selection Committee will soon meet and fast track the appointment of the new chairman. The search of Tata Group’s new chairman will not be limited to within the group, the channel said.

Various reports suggest that Tata Sons Board took the decision on “collective wisdom” to replace Cyrus Mistry. It appears that the principal shareholders felt it may be appropriate to change leadership. Some reports also suggest that a legal battle with the DoCoMo could be one of main reasons for ousting Cyrus Mistry. There is no change in CEOs at the operating level in the group.

In one of the biggest upheaval in the corporate sector, the Tata Sons Board has appointed Ratan Tata as the interim chairman of the group, replacing Cyrus Mistry. The decision was taken at a Board meeting today. Mistry has resigned from his post as chairman. The Board has constituted a Selection Committee to choose a new Chairman. The Committee comprises Ratan N. Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharyya, as per the criteria in the Articles of Association of Tata Sons. The committee has been mandated to complete the selection process in four months.

Cyrus Mistry had in December 2012 become the sixth chairman of the Tata Group, replacing Ratan Tata. Mistry had been the director of the company since 2006. Mistry was earlier managing director of the Shapoorji Pallonji Group.